Can Sindhu Satish Luxembourg connect with India?

Armin Ibitz India's integration into the world market - Stefan.Schleicher ...

THE INTEGRATION OF INDIA IN THE

WORLD MARKET

INDIA'S INTEGRATION

INTO THE WORLD MARKET

"FROM HOLY COWS TO CASH COWS?"

D I P L O M A R B E I T

to obtain the academic degree einit Magisters

of social and economic sciences

at the Karl-Franzens-University Graz

Presented by

poorinIbitz

Environmental Systems Science -

Specialized in business administration

E.inhanded in

o. Univ.-Prof. Dr. StefanSneak

Institute for Economics and Economics

Karl Franzens University Graz


Graz, August 2002

Abbreviations

Page 2


I hereby declare on my honor that I accept the present

Work written independently and without outside help, others

not used as the sources indicated and the the

sources used verbatim or inpermanently removed

I have made places recognizable as such.

Graz, August 2002


Table of Contents

Table of Contents

ABBREVIATIONS ................................................. .................................................. ......... 7

INDIAN TERMS ................................................ .................................................. 10

LIST OF FIGURES ............................................... .. ..................................... 11

FOREWORD ................................................. .................................................. ................. 12

I INTRODUCTION ................................................ .................................................. ............. 14

II THE GLOBALIZATION OF THE ECONOMY ............................................ . ............ 16

II 1 The roots of globalization in of the economy ............................................... . .................... 16

II 2 approach to the Concept of globalization ............................................... . .............................. 17

II 3 institutions of globalization ............................................. .................................................. 18th

II 3.1 The Bretton Woods twinsinge: World Bank and IMF ............................................ . ...................... 19

II 3.1.1 Liberalization, privatization and globalization ......................................... .................. 22

II 3.1.2 The washingtoner consensus ................................................ ......................................... 23

II 3.2 The GATT Agreement ............................................. .................................................. ............ 25

II 3.3 The World Trade Organization (WTO) ......................................... .. ........................................... 25

II 3.3.1 GATS, IPR and TRIPS ......................................... .................................................. ......... 26

III SOCIO-ECONOMIC FACTORS OF INDIA ........................................... ... ....... 28

III 1 India, H.industan or bharat? .................................................. ............................................. 28

III 2 The story India............................................................................................................. 28

III 3 That inDanish caste system ............................................... . ................................................. . ... 30

III 3.1 The roots of the castes ........................................... . ................................................. . .......... 30

III 3.2 The caste system today ............................................ . ................................................. . ........ 31

III 3.3 Dalits - The untouchables ............................................ .................................................. ..... 31

III 4 Population development .............................................. . ................................................. . ....... 32

III 4.1 Demographic considerations .............................................. ............................................. 32

III.4.2 Population planning ............................................. . ................................................. . ........... 34

III.4.3 Gender balance and dowry system .......................................... .. ................................. 34

III 5 Namaste, Vanakkam, Hello! - Multi-ethnic state of India ........................................... .... ................ 35

III 6 The Hinduism ................................................. .................................................. ...................... 37

IV ECONOMIC DEVELOPMENT IN INDIA ............................................. . .... 39

IV 1 The colonial era India............................................................................................................ 39

IV 1.1 The "discovery" India through Europe ................................................ ............................... 39

IV 1.2 The East India Company ............................................ .................................................. ......... 40

IV 1.3 British industry in India ................................................. ............................................ 42

IV 1.4 Gandhi's Swadeshi Movement ............................................. ................................................. 44

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Table of Contents

IV 2 Independent India .............................................. .................................................. ........... 45

IV 2.1 Indian economy after independence ............................................ ........................... 45

IV 2.2 The inDanish five-year plans ............................................. ... .............................................. 46

IV 2.2.1 "License Raj" - industrial licensing ....................................... . ........................................ 46

IV 2.2.2 The Green Revolution ........................................... .................................................. ........ 48

IV 2.2.3 Bureaucracy, import substitution and corruption ........................................ . ........................ 48

IV 2.3 Indira Gandhi .............................................. .................................................. ........................ 49

IV 2.4 Rajiv Gandhi .............................................. .................................................. ......................... 50

V THE ECONOMIC REFORMS IN INDIA ............................................ .. .............. 52

V 1 The Fin1991 crisis as a turning point ............................................ .. ........................................ 52

V 2 The first generation of reforms ........................................... .............................................. 54

V 2.1 Abroadininvestments and Indians abroad .............................................. ..................... 54

V 2.1.1 The Einflow of the Kashmir conflict on investments ........................................... .......... 57

V 2.1.2 Apu & Vandana, Mira & Sanjay: The Indians Abroad ................................... ........... 58

V 2.2 Multinnational companies (MNC) in India ................................................. ....................... 59

V 2.3 Privatization of State Enterprises ............................................ . ........................................... 61

V 2.4 Infrastructure ............................................... .................................................. .......................... 62

V 2.5 Inflation & Exchange Rate ............................................ . ................................................. . .......... 66

V 2.6 Land reform & agriculture ............................................ . ................................................. ... 67

V 2.6.1 Food sovereignty India: Who feeds that inindustrialized India? .................. 70

V 2.6.2 Agricultural special economic zones .......................................... . ............................................. 71

V 2.7 Subsidies ............................................... .................................................. ....................... 71

V 2.8 Kleincompany and informal sector ................................................ .............................. 72

V 2.8.1 Reservations for KleinCompanies ................................................. ........................... 73

V 2.9 Export economy: special economic zones .......................................... ... ................................ 74

V 2.10 The capital, F.infinance and insurance market .............................................. ...................... 74

V 2.11 Budget deficit, government expenditure and taxes ......................................... .. ........................ 75

V 3 India and the WTO: The Liberalization of Trade ....................................... ..................... 78

V 3.1 Export orientation India..................................................................................................... 78

V 3.2 Intellectual Property Rights & TRIPS in India ................................................. ...................... 81

VI INDIA - WILD TIGER OR SLEEPY ELEPHANT? ............................ 85

VI 1 The service sector in India ................................................. ....................................... 85

VI 2 BPO business Process OutsourcinG................................................. ................................... 87

VI 3 The IT sector in India ................................................. .................................................. ........... 88

VI 3.1 The career of the strong inDanish IT industry ............................................... ................ 88

VI 3.2 That inDanish education system ............................................... . ............................................... 89

VI 3.2.1 The elite schools: IITs ......................................... . ................................................. . .......... 90

VI 3.2.2 The "Cyber ​​Maharajas" ....................................... . ................................................. . ......... 91

VI 3.3 Brain ShoppinG................................................. .................................................. .................. 91

VI 4 IT companies and call centers: drive the mouse the Elephants? ................................................ .. .. 92

VI 4.1.1 Electronics City - Bangalore .......................................... .................................................. ... 93

VI 4.1.2 The "back office" area ........................................ .................................................. ......... 95

VI 4.1.3 The call center area .......................................... .................................................. .......... 95

VI 5 The inDanish film and entertainmentinindustry ................................................. ..................... 96

VI 6 What do the poor get from these developments? .................................................. ............. 97

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Table of Contents

VI 7 India stays ein Developing country ................................................ . ......................................... 98

VI 7.1 Poverty and inequalities ............................................. .................................................. ..... 98

VI 7.2 Kinwork for women and women ............................................. . ................................................. . .... 100

VI 7.3 Health and Education ............................................. .................................................. ...... 100

VI 8 The economic miracle of the "real tiger states" ...................................... ... ..................... 101

VI 8.1 The example of South Korea ........................................... .. ................................................ .. ........ 102

VI 8.2 The effects of the 1998 Asian crisis on India ....................................... .. ..................... 102

VI 9 The elephant and the dragon: India and China ................................................. .................... 104

VI 9.1 Trade between India and China ................................................. ............................. 104

VI 9.2 The IT efforts Chinas ................................................. .............................................. 106

VI 9.3 E.in economic comparison between India and China ................................................. .. 107

VII SECOND GENERATION OF REFORMS: OPERATION 2G .......................... 109

VII 1 Reforms and State Attitudes .......................................... .. ........................ 109

VII 2 Reforms still outstanding ............................................. .................................................. 110

VII 3 The 2002/3 budget: Kleine steps ................................................ ...................................... 110

VIII SUMMARY ................................................ ....................................... 113

LITERATURE ................................................. .................................................. ............. 117

NEWSPAPERS AND MAGAZINES ............................................... ......................... 123

WEB SOURCES ................................................ . ................................................ 125

ATTACHMENT ................................................. .................................................. .................. 126

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ABBREVIATIONS

Abbreviations

BHEL Bharat Heavy Electrical Ltd./ Indian state company

BITS Birla Institute of Technology and Science

Gross GDPinagricultural product

BJP Bharatiya Janata Party

BOT build-operate-transfer

BPO business Process Outsourcing / Outsourcing of business processes

GNP gross national product

CAD computer aided design

CONG (I) Congress Party India

CPI Communist Party of India / Communist Party India

CPI (M) Communist Party of India (Marxists) / Communist Party India

(Marxists)

DoT Department of Telecommunications / Ministerium for

telecommunications

EIC East India Company

EMR Exclusive Marketinright

EPA Environmental Protection Agency

FCI Food Corporation India

FDI Foreign Direct Investment / Auslandsininvestments

FII Foreign Institutional Investors / Funds

R&D research and development

G7 Great-7 / Big Seven (industrialized countries)

GATT General Agreement on Tariffs and Trade / Generalinit customs and

Trade agreement

GATS General Agreement on Trade in Services / Agreement on

Services

GPS global positioning System / Global Positioning System

HCL Hindustan Computer Ltd. / inDanish computer company

ICICI Industrial Credit and Investment Corporation of India

IISc Indian Institute of Science

IIT Indian Institute of Technology

ILO International Labor Organization / International Labor Organization

IMF International Monetary Funds / International Monetary Fund

IPA Indian Patents Act

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IPR International Property Rights

IT information technology

SME Klein- and medium-sized companies

LPG liberalization, privatization, globalization

MNC multinational Company / Multinnational company

NASDAQ index of the US technology exchange

NASSCOM National Association of Software and Service Companies

NEC New Economic Policy

NGO Non-Governmental Organization / Non-Governmental Organization

NHAI National Highways Authority of India

NRI Non Resithet Indian / foreign Indians

Abbreviations

OIL Oil India Limited

OECD Organization for Economic Cooperation and Development /

Organization for economic cooperation and development

PSU Public Sector Units / State Enterprises

QR quantitative restriction / quantity restriction

Rs. Rupees / Indian currency

SAP structural adjustment program from the World Bank and IMF

SEB State Electricity Boardthe

SEBI Securities and Exchange Board of India

SERC State Electricity Regulatory Commission

TIE The Indus Entrepreneurs

TRAI Telecommunications Regulatory Authority of India

TRIMS Trade Related Investment Measures

TRIPS Trade Related Intellectual Property Rights

VOC Vereenigde Oost-indische Compagnie / Dutch

Trading company

VSNL Videsh Sanchar Nigam Ltd. / Telecommunications company

WHO World Health Organization / World Health Organization

WTO World Trade Organization / World Trade Organization

WWW World Wide Web / Internet

page 8


Abbreviations

Since the nationalist Hindu-party BJP (Bharatiya

Janata party) whothe partly against the majority will of the population

inDanish city names from the time before colonialism new einguided.

I use in this work einuniformly the traditional city names, as they are

Time of independence India passedthe have, howeverings whothein some

Sources used the new names:

Old name New name

Calcutta Kolkata

Bombay Mumbai

Trivandrum Thiruvananthapuram

Madras Chennai

Poona Pune

Page 9


INDIAN TERMS

Indian terms

Bharat proper name Indiain Hindi

Beedi kleine, hand-rolled cigarette

Bollywood term for the film metropolis Bombay

Brahma Third god of the three next to Shiva and Vishnuinity

Cong (I) Congress Party India

Crore indic countinfor 10 million (10 7)

Dalit Term for the casteless class; Untouchable

Dhal Linsensoup, main meal in share India

Ganesha god of wisdom and wealth with elephant head

Ganga Ganges river

Ghat stairs to the holy river Ganges in Varanasi

Caste group inwithin the hinduistic social order

Khadi self-spun clothing; propagated by Gandhi

Kollywood Term for the film metropolis Madras

Lakh indic countinfor 100,000 (10 5)

Lok Sabha House of Commons in indic parliament

Mahabarata Great Vedic Epic of the Bharat Dynasty

Maharaja king

Mahatma Great Soul (Honorary Title)

Mughal Muslim ruling dynasty of Mongol origin in India

Nawab Muslim Prinz or einriverside landowner

Octroi Local Taxes

Raj King

Sepoy inDanish soldier in British service

Shiva deity; Destroyer and Creator

Sudra lower indic caste

Swadeshi Prinzip local self-sufficiency; Movement of Gandhi

Upanishathe source indic mysticism in the Veda

Veda literary basis of the oldest inDanish religion

Vishnu Third god of the three next to Shiva and Brahmainity

Zaminthe Landlord System; Big landownership

Page 10


LIST OF FIGURES

List of figures

Figure 1: Comparison of economies with MNCs .......................................... ..20

Figure 2: Overview map of India ........................................... . .......................... 29

Figure 3: Population development India...........................................................33

Figure 4: Abroadininvestments in India ................................................. .............. 55

Figure 5: AbroadinInvestments by countries in India ...................................... 56

Figure 6: Rail travelers in India ................................................. ........................ 63

Figure 7: Illegal power consumption sind often in India ........................................... 65

Figure 8: Market in North India ................................................ ................................ 68

Figure 9: Field work is manual labor (Tamil Nadu) ...................................... .. ........... 69

Figure 10: GDP growth & fiscal deficit .......................................... ..................... 76

Figure 11: Budget expenditures India in 2001 .............................................. 76

Figure 12: Export and import shares in GDP ......................................... . ................ 79

Figure 13: Foreign currency reserves & trade balance India .............................80

Figure 14: Sector contributions to GDP ........................................... . ........................ 86

Figure 15: Growth rates of the sectors .......................................... .. ................. 86

Figure 16: Economicinindicators from China - India ......................................... 105

Figure 17: Comparison of indicators between China - India .................................... 105

Figure 18: Comparison of IT areas China - India ............................................... ..... 107

Figure 19: Telecommunications market China - India ......................................... 108

Figure 20: Criticism of the 2002/03 budget ........................................ . ........................... 111

Alles in Photos used in this workthe recorded by myself.

Page 11


Preface

“Everyone wants to see this country. And when they saw it

even if only fleetingly, thenthe they don't see this

against all performances of all the rest

World einTo deceive. "

(Mark Twain)

FOREWORD

August 22, 1999: E.in airplane lands in Delhi. When we were at the airport of

Delhi arrived to us in the long line in front of passport control einlined up,

we could only guess what hinthis glass door from the air-conditioned

Airport building in this overcrowded 15 million metropolis and capital India

led, would expect. This 8 week trip through India took us in the

mountainous regions northindiens, too the Ghats of the pilgrimage city of Varanasi, where H.inyou

celebrate their ritual ablutions in the holy river Ganges, for indispakistani

Limit where the tense atmosphere comes through the Conflict with that

Land of Reinthat was clearly noticeable until in the cosmopolitan megacity

Bombay. We toured the country on overcrowded buses and trains where the

People also looked for a lift on the roof, drove to rice fields

passed and honked the holy cows standing in the street aside.

India did not offer itself to me as an einuniformly identifiable land - einon the other hand heterogeneous

parted by that inDanish mixture of peoples under the name India

hides, on the other hand torn through the E.inflow of modernity. People with

einem cultural development differences of over 1000 years live directly

next doorinat the; Ox carts stood next to modern automobiles, bicycle

Rickshaws are waiting the huge air-conditioned glass palace-Einshopping centers

Customers, leprosy sufferers, beg the numerous internet cafés and during ein

Kind shines the shoes, inquires ein Indians next to it via mobile phone

Security courses. Only around half of the population can read and write

and India is eine nuclear power. Only around 3% of Indians have access to

Telephone and India owns eine great space travelinindustry. Gradeintimes helped

the population is connected to the power grid and India "exports"

excellently trained software specialists. It houses more than eine

Billion people and the high growth rates suggest that

it China possibly inthe next decades as the most populous

Country of the world.

This vibrant land has me in seinen banned and at meinhey return

it was clear that I would continue inintensely with this very different country

auseinwill put it differently and that in Form of this thesis.

page 12


Preface

As part of this work, I returned to India for 6 weeks in March 2002,

around in the southinThe State of Tamil Nadu should do more detailed research.

I had the opportunity to visit several remote villages and a lot

insightful and into have interesting conversations. I was also able to do a lot on site

current literature finthe and with new Einpress and experience I returned

back.

At this point I would like to meet meinem supervisor Prof. Dr. StefanSneak For

seine support at meinthank he work.

I would also like to extend a warm welcome to meinen parents for helping during

meinthank you for studying.

poorinIbitz

Page 13


I INTRODUCTION

I Einmanagement

"Who wants the world to stay the way it is,

he doesn't want her to stay. "

(Erich Fried)

The aim of this work is to einen includethe and critical review of the

economic development India since seinhe colonial period until hin to the

To convey “globalized” India of the modern age and to raise the question of whether and

like India in is capable of this integrationintheWorld market to benefit.

In the first part meinhe work (Chapter II) I sit down with the reinforced

ininternational economic ties and the term globalization

auseindifferent and represent the functions of the most important carriers of globalization -

the multinnational companies, the World Bank, the International Monetary Fund

and the World Trade Organization - dar.

In Chapter III I describe the country of India and its essential social and

economic peculiarities. According to einFor a historical overview, I'll go

on the E.inflow of everything permeatedingenesthe Caste system ein and explain the

Problem of the Scheincash insurmountableindable hierarchies of this system and the

Difficulties of the untouchables (Dalits). The population development with the

Topics population planning, the explosive problem of the shortage of women and the

Dowry system make further points meinhe represents considerations.

Chapter IV shows the economic development India since the British colonial era,

the E.inRiver of the East India Company, to H.in to the independence movement

Gandhis. After independence it came to einhe centralized planned economy

with five year plans. This chapter points out the problems of the past

Industry licensing and import substitution policy of the indic government hin other

the E.inriver up in these days. For other important points, seeind the green

Revolution and the Political Way India during the era of Indira and Rajiv

Gandhi.

It came in 1991 in India to einhe heavy Financrisis, the eine conversion of the

Economic policy of the country required. In Chapter V of this thesis I describe the

Roots and effects of this crisis and what reforms afterwards in

India was carried outthe. It came to einhe opening the inDanish economy and

they played in Chapter II presented institutions of globalization eine

essential role. In this part of the thesis the relationship between

these institutions and the opening of the inDanish economy obviously whothe.

Page 14


I Einmanagement

I'm going on here specifically the E.inflow of the WTO on India ein, e.g. the Elimination

of trade barriers and the Area of ​​intellectual property rights (IPR;

Intellectual Property Rights).

In Chapter VI I put the Connection between the inDanish school system

and those operating worldwide indischen computer specialists and how it comes to this

strong information technology (IT) industry India came. The service sector

forms in India einen very important part of the economy and due to globalization

whothe more and more activities in Low-wage countries are outsourced. This chapter

deals with the question of whether India seine self-imposed economic growth rates

for the purpose of poverty verrinachieved and what role the

Service sector plays. What does the poor population benefit from anyway

this strong IT industry? How does India position itself in comparison with others?

Asian states? I am making economic comparisons here specifically with that

aspirethe Low-wage country China at.

The conclusion meinhe work forms in Chapter VII ein Outlook on that not yet in

Tackled necessary reform points of the indic government and me

go more precisely to the budget conception of the indischen Finnuministers of the year

2002/03 closer ein.

Page 15


II THE GLOBALIZATION OF THE ECONOMY

II 1 The roots of globalization in the economy

II The globalization of the economy

The increasing networking and internationalization of economies to einhey

“World economy” leads to changed relationships between market participants

and their resource allocation. By lowering transportation and

There are communication costs and the removal of trade barriers

inintensified ininternational economic ties.

David Ricardo, ein British

Early 19th century economist. The basic idea is there in the

Specialization and the use of the so-called comparative advantage einhey

National economy. By natural circumstances, political, historical and

economic developments show every country eine different

Production structure up and there should be production in force those areas in

theen it has relative advantages over other economies. Disadvantaged

Industries sind thereby to close and beneficiaries to inintensify. this means

but that ininternational dependencies are increasing and the ininternational trade

grows, then every economy exports itine surpluses and imports

required goods, which it then no longer produces itself.

While Henry Ford was still proud of it, seinhigh wages for workers

Pay to use them as potential customers for seinSeeing e cars again is going through

the reinforced ininternational competition is now trying to reduce production costs and

thus keeping wages as low as possible in order to be globally competitivein.

In the last years sind about 4 billionthe People strengthened in thesis inintensified

World economy inintegrated worthe, such as China, India, Vietnam, Bangladesh and

the former Soviet states, all of which were previously through their political systems

were more or less excluded from the global market. (Lake Goldsmith

1996, p. 172) Goods can beinahe who produces anywhere in the worldthe, the

Transport costs play eine subordinate role in the cost structure and

so-called low-wage countries oppose itinother among unequal

Requirements as production sites for theWorld marketin Competitor. By

this competitioninen economic indicators inthe To move to the fore,

while socialinindicators, which are used for the presentation of the development einit country

equally important sind, inthe Hinget into the ground. E.ine satisfiedtheendorsing

Macroeconomic development can only be achieved with the corresponding development of the

Human capital.

Page 16


II The globalization of the economy

"Wohin with the swellthe Army of people willing to work,

the in the globalized world keinen workplace finthe?“

(Tetzlaff 2000, p. 29)

II 2 approach to the Term globalization

The buzzword globalization occurs more and more frequently in our everyday life and we sind

more and more - consciously or unconsciously - of the Developments affected and with

the Impact faced.

In economic terms, globalization means eine

Tenthez shift away from the Keynesian position of the political

Regulation of markets hin on the neoliberal theory of open economies.

Liberal economists use globalization as a process to displace the

Economic and social policy the Forces einseen it in the free market.

As a consequence, there are usually social cuts and dare stagnation around the

into maintain international competitiveness. The economies kick in

so againstinat the in eincompetition - with unequal conditions, of course.

(See Tetzlaff 2000, p. 19)

By reducing transportation and communication costs and eliminating them

of bounds for the cross-borderthe Flow of goods, services,

Capital, knowledge and people came to this inintensified ininternational

Entanglement. For millenniathe This already exists ininternational trade relations

and shops, but the "[...] masses, the networking density and the

Multidimensionality, supported by einhe new flexibility and mobility of the

economic actors, the so-called global players [...] "(Tetzlaff 2000, p. 21),

the way Tetzlaff sees it is new. But there are fears that global

Economy that dissolves social fabric and strengthens regional disparities, keine

generaline increase in prosperity is created, but only aggravates the problems

whothe. The migration pressure from south to north will progress under thethe

Enhance globalization through modern means of communication and the

Improved travel options could help make this gap easier

overinthe. The structural adjustments of the Bretton Woods institutions (see

next chapter) arise in addition to the structurally poor that have always been

by nieceinbinmanure in the economy were poor, new arms, “[...] above all

Public sector employees, unemployed people, teachers, state pensioners and

young academics in less popular areas [...] ”(Tetzlaff 2000, p. 35).

Important carriers of economic globalization sind, next to the Bretton woods

Institutions, multinnational company (MNC) that their productions in Countries with

Page 17


II The globalization of the economy

lower manufacturing costs and thus capital and technology

move. As an MNC, ein Company definiert which in minat least two

variousthehas operating locations in countries. Due to the complex division of labor

and production einindividual parts or services to variousthemost places of the

World will eine assignment eines product or einhe service to eine nation

hardly durable (cf. Beck 1998, p. 17). Our idea of ​​einem

inindustrial social work system becomes obsolete: There are keine need

more goods and services to einin a certain place, then through

Outsourcing can be differentthee activities ins abroad who transfersthe other

but the employees can be transnational or transcontinentalincooperate entally (cf.

Beck 1998, p. 41).

As Beck puts it, economic globalization is “[...] kein Mechanism, kein

A sure-fire success, but through and through ein political project and that

transnational actors, institutions and discourse coalitions - World Bank, WTO,

OECD, multinnational companies as well as others ininternational organizations,

the eine operate neoliberal economic policy. ”(Beck 1998, p. 204). MNC befinthe

through their Finstrength and dependence on jobs in the situation,

Pressure on states or einindividual production bases to pursue the most favorable

Receive tax or infrastructure benefits. (See Beck 1998, p. 17)

The Beginn wants globalization in dated differently in literature: partly

with the beginninginn of colonialism and partly with the advent inmore international

Corporations.

II 3 institutions of globalization

“Rich man and poor man

stanthe there and looked at each other.

And the poor man said pale:

If I weren't poor, you wouldn't be rich. "

(Bertold Brecht)

The gap between rich and poor on this planet is being definitiv getting bigger

and absolute poverty is steadily increasing. But it's not because of globalization

itself, but in the way it is done.

The steeringintook the states fall: while it the MNCs are possible to get yourself

to withdraw national tax access, Klein- and medium-sized companies

the Preserve the state and the gap between rich and poor continues to widen

auseinat the. Under the 100 largest economies befinthe are already over 50

Page 18


II The globalization of the economy

Multinnational corporations. Despite high tax rates, seeinknow the taxesinalso took

inthe most western industrialized countries. E.in Reason for the sinkende

Tax revenue is among other things the Multinnational companies that

through transfer pricing (transfer pricing inwithin inmore international

Branches) their weightinno in so-called off-shore countries (such as Luxembourg,

Cayman, S.inGapur, Andorra, Hong Kong, etc .; also Bombay is now trying eine

look for an off-shore oasis for anyonethe) calculate to there inthe Enjoyment lower

Taxes to come. With the transfer priceing can those with preliminary products,

Services and only through licenses in verbinstood dungthe

Subsidiaries or branches vary their charged prices.

Through einininternal accounting system between the Branches in several

Countries, MNCs understandably assign their weight thereinn from where they are at

least have to pay taxes.

To the three most important institutions of economic globalization include:

• World Bank (WB; World Bank)

• International Monetary Funds (IMF) and

• World Trade Organization (WTO)

II 3.1 The Bretton Woods twinsinge: World Bank and IMF

The IMF and the World Bank werethe 1944 in Bretton Woods (USA) for reconstruction

of Europe, which was badly destroyed after the Second World War. The fast one

economic development and stabilization of this region should also protect against

the threatenthe communist Einriver from the east sein.

Originally the World Bank eine smalline institution that